WHY CIMB fair value so high RM 2.55??

CIMB knows something that I don't know????

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform call on YTL Power, with an unchanged sum-of-parts based target price of RM2.55. 

The research house said on Monday it was positively surprised that YTL Power emerged as the lowest bidder for the 2,000MW coal-fired power plant under Project 3B ahead of favourites Tenaga and 1MDB.

“We believe the news that YTL Power submitted the lowest bid for Project 3B will put the company on investors’ radar again. The re-rating catalyst will be the announcement of YTL Power securing the tender for Project 3B that is expected by early-2014,” it said.

CIMB Research was commenting on a news report that the YTL group bagged a major government contract (the 1BestariNet project) last year and took the lead in another (YTL Power outbid Tenaga Nasional and 1MDB in the tender to build and operate a 2,000MW coal-fired plant under Project 3B).

The report stated the tender will only be awarded in early-2014 but industry sources said that YTL Power's bid of 25.12 sen per kilowatt hour (kWh) was the lowest compared to 1MDB's 25.33 sen per kWh and Tenaga's 28.07 sen per kWh.

However, the bids still have to undergo technical evaluation and the industry sources noted that YTL Power's bid was only marginally lower than 1MDB's.

“We believe that the news is positive for YTL Power, assuming that it does win the bid. This would provide YTL Power with more consistent cashflow in 2018 onwards and supplement its current stable businesses.

“Although the dividends could be called into question given the high capex required for the project, we believe YTL Power could ring fence the construction cost due to the strong and stable cashflow of the power plant,” it said.

CIMB Research said investors should stay invested in YTL Power as clinching the bid will be a re-rating catalyst for the stock.

“We believe that the returns from the power plant will provide stable cashflow and translate into higher dividends in the longer term.

“Furthermore, the return of YTL Power to the IPP scene implies that there may be more major contract wins in the future,” it said.